Hoboken, New Jersey, Feb. 13, 2018 (GLOBE NEWSWIRE) — According to LendEDU’s report, entitled Do Student Loan Borrowers Understand Loan Fees?, which was done in collaboration with NASFAA, much can be done to improve how loan fees are dealt with on federal student loans.

Loan fees, also known as origination fees, were originally designed to offset the cost of the lender providing the borrower with a student loan. Since loan fees are not charged until the time of the loan disbursement, they often catch student loan borrowers unaware, and with some loan fees ranging as high as 4 percent of the total loan, it adds another financial burden to already cash-strapped student loan borrowers.

All federal student loans have origination fees. Initially the government used these fees to offset the cost of subsidies offered to private lenders that issued federal student loans. In 2010, the government began originating and funding all federal education loans, which meant subsidies were no longer necessary. However, the loan fees have stayed in place, and it is estimated that the federal government has made $8.1 billion in revenue over the past five academic years due to these fees.

“Origination fees are unfortunately a cost that the majority of college students will face,” said LendEDU’s CEO and Co-Founder Nate Matherson. “At LendEDU we are trying to educate consumers on the different fees and costs before borrowing,” said Matherson.

As part of the LendEDU-NASFAA collaborative study, three classes of federal student loan borrowers were surveyed:

(1) 500 current undergraduate students that currently have student debt from Federal Direct Loans and have borrowed within the last year; (2) 500 parents that currently have student loan debt from the Federal Parent PLUS Loan Program and have borrowed within the last year; (3) 500 current graduate students that currently have student loan debt from Federal Direct Unsubsidized Loans and have borrowed within the last year.

Using these three respondent pools, LendEDU, in collaboration with NASFAA, revealed some interesting findings surrounding origination fees. When the results from all three respondent pools were combined:

38.73% of respondents could correctly identify the definition of a loan fee,

59.60% of respondents either thought they were not charged a loan fee or were unsure if they were charged one. All federal loans have a loan fee, so all respondents were charged a loan fee.

52.80% of respondents believed they were adequately informed about origination fees, while the remaining respondents thought the opposite.

49.13% of respondents felt cheated by the federal government and do not believe they should have been charged a loan fee, while 35.93% felt grateful that they were able to fund their education and were OK with paying the fee. Another 14.93% had no feelings either way.

“As lawmakers from both sides of the aisle work to streamline the financial aid process and make college more affordable, we encourage them to eliminate this unnecessary and harmful tax on student loan borrowers once and for all,” said NASFAA President Justin Draeger.

LendEDU was founded by Nate Matherson and Matt Lenhard in August of 2014. LendEDU is a graduate of Y Combinator’s W16 class, the Iowa Startup Accelerator, and the Horn Program at the University of Delaware.

About NASFAA:

The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 20,000 financial aid professionals at nearly 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the United States. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators.